Blue sky attracts optimists to prestige property

Rose-tinted glasses have helped sales in Rose Bay, Sydney’s top achiever in the past six months.
Photo Michele Mossop

by
Ainslie Chandler

It has been a disappointing few years for those lucky enough to live in the nation’s top-end suburbs.

Property prices in the most prestigious locales plunged during the financial crisis and values are yet to recover; transaction volumes are still slow and buyers still wary.

But in 2012 some areas have started to make up ground as bargain hunters think they spy the bottom of the market. Those in the sector are quick to quash thoughts of a full-blown recovery, arguing it is more of a stabilisation.

To understand the trends in top-end suburbs for 2012, the Weekend Financial Review asked industry analyst Australian Property Monitors to evaluate the performance of the top 10 per cent (top 25 per cent for Canberra and Adelaide) of capital cities’ property markets, by median price.

AFR
AFR

APM senior economist Andrew Wilson says top-end markets tend to be unique in their behaviour, each driven by a different group of factors, including lot size, views and location, which make them coveted. This is why performance has been so mixed in 2012.

The high values of the properties and relatively low volumes can also lead to sharp rises and falls in average values of transactions in some markets, he says. For instance, the sharp jump in Sydney’s Rose Bay in the past six months is a case in point.

The standout market for 2012 has been Melbourne, Wilson says, where momentum has been building as buyers identify opportunities in the $1 million to $2.5 million price bracket, through the city’s inner east, inner south and bayside suburbs.

“It will be interesting to see if Melbourne will continue with its momentum," he says, suggesting buyers may no longer see the opportunities in 2013 that they saw in 2012. “The economy has got some considerable question marks over it."

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In Sydney and Perth, Wilson says the All Ordinaries Index needs to climb through 5000 points for a sustained period before confidence in prestige housing will return.

Company profits and dividends need to rise to create confidence in markets “dominated by conservatism", he says.

Rose Bay, abutting Sydney Harbour in the eastern suburbs, was the city’s best performer for the final six months of 2012, and APM figures showed a 27.5 per cent rise in the median price. However, year-on-year, the leafy enclave gained only 5 per cent and the growth follows a steep dip in 2011.

McGrath Estate Agents’ Hamish Robertson says the numbers of properties transacting in the area increased in 2012 as owners became more willing to accept lower offers and buyers saw some value in the market. A home that was worth about $5 million a few years ago can be snapped up for $4.25 million, he says.

Much of the momentum in Rose Bay has been being created by upgraders – families moving from apartments to semi-detached homes or to detached homes, according to Roberts.

“If they are securely employed or in a solid business, interest rates are remarkably low and it could be a good time to buy," he says.

Meanwhile, North Curl Curl was a tearaway winner in an otherwise subdued northern beaches market, adding 26.2 per cent for the year, to reach a $1.4 million median price, after dropping sharply in the wake of the global financial crisis. But neighbouring Curl Curl was one of the year’s worst performers – its median price was down 6.4 per cent to $1.22 million, after recovering some ground in 2010.

Overall, the northern beaches still underperformed in 2012. And the lower north shore and eastern suburbs have stayed flat or shown small improvement, off a low base.

Melbourne’s traditional blue-ribbon suburbs, Toorak, Malvern and Armadale, have remained relatively stable. The number of transactions picked up towards the end of the year after the onset of the spring selling season, although there was little improvement in values.

Of the 148 listings in Toorak in the past year, only 51 sold. At the top end, vendors who do not receive their desired price are more likely to hold on to their home than sell. But agents agree that sales numbers improved towards the end of the year as vendors began to be more realistic. Armadale had most success, with 74 of the 99 homes listed changing hands.

Andrew Baines of Kay & Burton says while Melbourne traditionally responds to auctions, uncertainty and low confidence have encouraged vendors to use private sales, and that has paid off.

South Yarra has been a standout suburb for private sales and Baines says Kay & Burton has had seven good results recenly, including $4 million and $5 million sales in Fairlie Court, Chambers Street and Walsh Street.

In a sign the top end of Perth’s market appears to be stabilising, none of the city’s most prestigious suburbs made it into the list of the best or worst performers of 2012. Instead, says APM, the second tier is making the biggest moves.

After copping the brunt of falls following the financial crisis, Perth’s illustrious “golden triangle", which occupies prime land between the Swan River, the ocean and the CBD, has had a quiet year.

Flashy Dalkeith is down 2.5 per cent to a median house price of $2.6 million; leafy Mosman Park is down 4 per cent to $1.09 million; and beachside Cottesloe finished the year up slightly, rising 0.8 per cent to $1.61 million.

It was a different story north of the city, and prices fell sharply on the millionaires’ row of West Coast Drive, which hugs the coast all the way from Trigg to Sorrento.

According to APM, prices in Trigg fell 19.6 per cent over the past 12 months, as the median house price fell to $843,750. Further north in Marmion, the fall was slightly less, down 15.1 per cent to $910,000.

Acton Coastal’s Chris Jonker says there is some confidence in the under-$1.5 million market, but he’s seen 40-50 per cent price drops in multimillion-dollar waterfront properties since the GFC.

“Particularly on West Coast Drive, people were just land banking," he says. “They were going to use the equity to build a new house but they’ve lost the value now. So they just quit the stock, and flooded the market."

Prices in Brisbane’s prestige suburb, Ascot, known for its large, colonial-style homes and big backyards with tennis courts, are rebounding.

APM figures show the suburb recorded 25 sales and a 47 per cent jump in median house prices in the six months to October.

But while signs are good, like its neighbour, Hamilton, it has come off a relatively low price base.

Prices have been hit hard as business people, hurt by a slowing economy, have had to downsize. One bought into the suburb for $9 million in 2007 and sold out in August 2012 for $5 million.

Some vendors are getting itchy and that is showing up in places such as the traditionally exclusive Palm Avenue, where high-profile business and fashion people reside. At least eight properties on that street are up for sale.

Ray White Ascot’s Leigh Kortlang says that situation is “highly unusual". “Property was usually very tightly held there," Kortlang says. “Although there have been a few on the market for some time."

Hamilton, which fronts the Brisbane River, has shown some price resurgence, up 9.8 per cent in the six months to October and 7.5 per cent in 2012.

After the 2011 floods, not all prestige riverfront properties have prospered: in the same six-month period, St Lucia has lost 9.8 per cent and New Farm 12.9 per cent.

Vendors of top-end stock on the Canberra market in the past year have chosen to withdraw their homes from sale rather that sell for less than expected.

Robert Westropp-Evans of Luton Properties says the prestige end was sluggish last year and Griffith, Forrest, Red Hill and Yarralumla experienced small price falls.

The number of days properties were on market was longer than in the past for these suburbs, often beyond 90 days.

Of the 39 homes listed for sale in Yarralumla, only 10 sold.

“It’s an excellent time for astute Canberrans to upgrade to a more prestigious address and benefit from that move as the top end market rebounds strongly in the years to come," he says.

Narrabundah performed better: 31 of 40 sold and the median price rose almost 10 per cent to $668,000.

Price growth has returned to some of Adelaide’s upper-end suburbs in 2012 after years of subdued activity.

Toorak Gardens, a suburb with streets of heritage homes on large blocks and within walking distance of the city, posted the strongest growth of the year. Its median price rose almost one-third to $1.2 million after a weak 2011. But the result came from a low number of sales, after only 15 properties changed hands, from 31 listings.

Nearby Kensington Gardens, also to the city’s east, posted sound growth too and the median price was up 21 per cent to $725,000, with 21 of 34 listed properties selling.

The gain followed a drop of close to 5 per cent in 2011.

Anthony Toop of Toop & Toop says the prestige market had a strong spring selling season and there is a growing sense that the market has bottomed or is close to it, as affordability has improved.

“There is plenty of money around – it’s just that the people are discerning," Toop says, noting that the end of the year has been the busiest period of the past 12 months, with four $4 million-plus sales in a 10-day stretch at the start of December.